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Regulations Input

How to be an effective player in the regulatory process

Written by admin on . Posted in Blog, Compliance & Regulations.

By William J. Showalter, CRCM; senior consultant, Young & Associates

We all noticed the increased level of regulatory changes over the years by the various banking supervisory agencies – encompassing changes from new or revised statutes, as well as changes at the regulatory agencies themselves.

Financial institutions can and, if they have not already, should become active and effective players in the regulation-making process. The bank’s role is to educate the regulatory agencies about how proposed regulations will impact the industry so that more amenable, less onerous rules may result.

Writing an effective comment

Policies GraphicBelow are a few tips on how to effectively communicate your concerns to the regulators.

Organize your comment letter/submission for easy reference. Since the agencies often face a statutory deadline for their action and must process many comment letters, the organization of yours can be crucial to its effectiveness.

Arrange your comments to match the structure of the proposed rule to make it easier for the agency to process. Use subheadings that correspond with those of the proposal and clearly identify the sections you reference. The agency will typically have a number of people working on a proposal and will distribute relevant parts of your comments to staff attorneys and others responsible for those particular sections.

One effective way to organize your comment letter is first to summarize the points you wish to make. This allows prompt identification of the part(s) of the proposal you are addressing. Then you should spell out your points clearly, with sufficient detail to have an appropriate impact, but not so much as to make your comments less forceful.

  • Be concise. Your comment letter should only be as long as it needs to be. Do not feel that you must address every item in the proposal. A tightly written, well-organized letter that focuses on the elements that most concern the commenter, as well as any you think are particularly positive, has more impact than one that rambles through all points in the proposal.
  • Provide background. Information about the type of bank or thrift you represent can provide valuable insight and perspective for the agency. Include a brief description of your bank’s size, structure, market, and any other information that may be pertinent to the proposal.
  • Concentrate on issues over which the agency has some discretion. When the underlying statute mandates a particular provision, suggesting that the agency abandon that requirement is not practical. The agency cannot simply ignore a legislative directive. Do not suggest changes that would undermine the general intent of the law implemented by the regulation. Instead, focus on how the regulators propose to implement the law.
  • Be specific. Sweeping generalizations about the impossibility of complying with a proposed regulation are not worthwhile. The agency generally is required to implement some statutory mandate and cannot disregard that responsibility. Concentrate on operational, customer-impact, and compliance management issues. Give the perspective of your bank, rather than trying to infer what impact the proposal will have on the banking industry as a whole.
  • Make constructive comments. Give examples of problems you envision that specific sections of the proposal will cause. Explain how you feel the negative result can be avoided, or at least reduced. Do not hesitate even to rewrite a section of a proposed regulation if you think it is unclear or misses a point. Suggest a reorganization of the provisions in the proposal to make it easier to read and understand, and to apply in everyday situations.
  • Follow submission criteria. Send your comment letter or e-mail to the designated agency official, not another staff member that you know. Include the reference or docket number of the proposal in your letter to ensure proper handling. Try to follow any specific requests which facilitate processing, such as type size or spacing. Of course, mail your letter or send your e-mail in time to reach the regulator by the due date specified in the proposal. Comments may be accepted also by facsimile or personal delivery, with special instructions. Many agencies also consider comments received after the due date, but they are not obligated to do so. Also, if the agency receives a great volume of comments, late comments slow the rulemaking process.
  • Back up your position. Explain why you think difficulties are likely to occur and how the proposal would produce those consequences. Be specific and provide any facts, data, or anecdotal evidence you think will prove your point. Anecdotes can be particularly effective in helping the regulators understand the practical implications of what they are proposing. If an existing regulation is being amended, provide statistics on how much it costs your bank to comply with this particular requirement. If the proposal is a new regulation, estimated cost information would be helpful to the agency.

Try to show, when appropriate, how these costs seem to outweigh the intended benefit of the regulation to your customers or the banking industry. Impact on customers is a key issue in rulemaking by the agencies. When proposed rules are likely to curtail current or new products, reduce credit availability, cause confusion, increase costs to customers, limit access to customer contact staff or services, or have other negative effects for customers, you should raise these issues in comment letters and e-mails. While the regulator may not be able to implement your suggested change, compelling, concrete details can help them adopt your suggestion in some form.

Conclusion

Too often bankers choose not to participate in the regulation-making process. They say that they don’t have the time or the communication skills or don’t think they can make a difference. However, writing comment letters is similar to voting. If you don’t exercise the power you have, you can’t complain about the outcome. When you do comment, you can positively affect the design and development of regulations.

Explore Y&A’s suite of compliance assurance services here.

Cybersecurity Tool

Moving beyond the FFIEC cybersecurity assessment tool

Written by admin on . Posted in Blog, Cybersecurity & Information Security, Information Technology.

By Noah Lennon, CCSP, CISA; consultant, Anthony Kniss; IT Manager, and Brian Kienzle, CISSP, OSCP; senior consultant Young & Associates

The Federal Financial Institutions Examination Council (FFIEC) retired the Cybersecurity Assessment Tool (CAT) on August 31, 2025, citing progress as the rationale for the change.

While acknowledging that the security controls within the CAT remain fundamentally sound, the Council has determined that, “Several new and updated government and industry resources are available that financial institutions can leverage to better manage cybersecurity risks.”

The tool that we are seeing most prominently to succeed the CAT is the Cyber Risk Institute’s CRI Profile. This tool is based on the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework (CSF) 2.0. The CRI Profile was developed specifically with financial institutions in mind, including additional considerations such as core processing, online/mobile banking, and third-party risk management.

This decision signals a coordinated, whole-of-government effort to enhance security and resilience across all critical infrastructure sectors, including finance. This shift encourages institutions to move from a proprietary assessment tools to nationally recognized standards.

New Reference Point: NIST SF

The NIST Cybersecurity Framework is a set of cybersecurity practices for IT, prioritized for risk reduction. While the CSF if applicable across all critical infrastructure sectors, other frameworks such as the CRI Profile and the upcoming CISA CPGs for financial services have adapted it to align with the regulatory requirements of the financial sector.

For small and midsize institutions with limited resources, a prioritized baseline for cybersecurity is invaluable. The NIST CSF helps cut through complex control lists and guide leadership to focus on the most effective actions first. The outcomes in the framework form a security baseline, representing the essential practices every critical infrastructure entity should adopt. NIST based these outcomes on their demonstrated ability to reduce risk from the most significant and frequent threats.

By establishing this foundational baseline, institutions can ensure they have addressed their most pressing information security threats. The next step is to integrate this baseline into a more comprehensive program structure, a role filled by the CRI Profile.

Building a Mature Program: The CRI Profile

While CPGs offers immediate, actionable steps, the CRI Profile, based heavily on the NIST CSF 2.0, provides the full structure needed to create a sustainable, risk-based cybersecurity program that addresses both operational and strategic needs.

  • Holistic Risk Management: The CRI Profile provides guidance and a taxonomy of high-level cybersecurity outcomes applicable to any organization, regardless of its size, sector, or maturity. Organizations can leverage the CRI Profile to build a holistic risk management program.
  • The Seven Functions: The CRI Profile Core is organized into seven functions, as depicted in Fig. 1.
  • Resources for Smaller Organizations: The CRI Profile includes features emphasizing governance and supply chains. Critically for CFIs, the Cyber Risk Institute provides a Guidebook that distill specific portions of the Profile into actionable “first steps” to help ensure the Profile is relevant and readily accessible by smaller organizations.
  • Mapping: Every security practice in the Profile is mapped to a corresponding subcategory in the NIST CSF. This helps to provide assurance that the practices are mature and peer-reviewed by cybersecurity professionals across all industries.

Source: The NIST Cybersecurity Framework (CSF) 2.0

Other Applicable Resources

In addition to the NIST CSF and CRI Profile, supervised financial institutions may also use industry-developed tools like the CISA CPGs or CIS Security Controls.

Community financial institutions must ensure their self-assessment tool supports an effective control environment and matches their risk. Standardized tools can help with self-assessments, but FFIEC members focus on a risk-based approach during examinations. As cyber threats evolve, examiners may review areas not covered by all tools.

Aligning with the FFIEC Audit Framework, the following table maps key FFIEC audit expectations to the specific solutions provided by this integrated framework approach.

Aligning with new frameworks proves the transition from the CAT is not a break from FFIEC principles, but a deeper commitment to them using more effective tools. This change helps build a defensible cybersecurity program grounded in the same language and standards as expected by regulators. Adopting these frameworks is a strategic step to reduce risk and improve governance across the institution.

Moving Beyond Compliance to Resilience

The withdrawal of the FFIEC CAT marks a pivotal and positive development for community financial institutions. This change empowers organizations to employ tools that are actively maintained and more aligned with the modern threat landscape.

Young & Associates offers IT audit expertise to help financial institutions navigate the transition from the FFIEC CAT. Our team supports effective control assessments and alignment with current regulatory frameworks to strengthen cybersecurity programs and governance. Reach out today to have our experts help your institution navigate this change.

What alternative data can be used to determine creditworthiness?

Written by admin on . Posted in Blog, Risk Management.

By Alex Heavner; Credit Analyst, Y&A Credit Services

It is no surprise that building your credit is much more difficult than destroying it. Experts estimate that around 45 million Americans do not even have a credit score.

This group includes approximately 26 million individuals who are credit invisible — those without a credit history at the three major credit bureaus — and 19 million with thin or unscorable credit files.

Traditionally, lenders rely on credit reports, utilization, and the length of credit history to assess creditworthiness.

With the digital boom of the 2010s, fintech companies pioneered the use of alternative data to bring more borrowers into the financial mainstream.

These efforts aim to provide more inclusive, real-time insights into a borrower’s ability and willingness to repay debt.

Creditworthiness Graphic

Types of Alternative Data Being Used

Modern lenders and data aggregators have found several non-traditional data sources that can indicate creditworthiness, including:

  • Rent payments: On-time rent payments are one of the strongest indicators of financial responsibility for consumers without mortgage histories. Services like RentTrack and LevelCredit report rent payments to bureaus.
  • Utility and telecom bills: Payment histories on water, electric, gas, and mobile phone bills can show how consistently a consumer meets financial obligations.
  • Subscription services: Through services like Experian Boost, payments for Netflix, Hulu, or other recurring subscriptions can be used to strengthen a credit file.
  • Bank transaction data: Analyzing income deposits, recurring bills, and cash flow from checking and savings accounts can provide insight into the financial stability of a borrower. This is especially common in open banking models enabled by APIs like Plaid or MX.
  • Employment and education history: Certain alternative scoring models, particularly those used internationally or by startups, incorporate job stability, industry, education level, and professional certifications as proxies for future income and repayment capacity.
  • Social media and behavioral data: Though controversial, some experimental models have assessed consistency in online behavior, device usage, or even language patterns on social platforms to infer risk. These models are rare in the U.S. due to privacy and regulatory concerns.
  • Insurance, rent-to-own, and payday loan history: Nontraditional financial products may also yield data that can supplement thin files—though care must be taken to avoid perpetuating high-risk lending patterns.

Benefits of Using Alternative Data

  • Expanded access to credit for the underbanked and credit invisible.
  • More frequent updates, allowing real-time assessments of financial health.
  • Better risk segmentation, especially in conjunction with traditional models.
  • Potential for compliance with fair lending laws, provided models are explainable and data is obtained with consumer consent.

Risks and Considerations

  • Data privacy and consent: Consumers must opt-in for certain data types, especially bank transactions or subscription history.
  • Model explainability: Lenders must be able to explain adverse actions to borrowers under the Equal Credit Opportunity Act (ECOA).
  • Regulatory scrutiny: The Consumer Financial Protection Bureau (CFPB) and Federal Reserve have emphasized the need for fairness, transparency, and non-discrimination in alternative credit scoring.

Recommendations for Community Banks and Credit Unions

Implementing alternative credit scoring models can be a powerful tool for enhancing financial inclusion and capturing underserved market segments.

Key steps for smaller financial institutions to get started:

1. Start with Rental and Utility Data

Partner with vendors like LevelCredit, RentTrack, or Esusu that provide verifiable and reportable alternative payment data. This low-barrier entry point can help expand lending to young renters and non-homeowners.

2. Use Bank Transaction Data Through Open Banking APIs

Explore partnerships with fintech enablers like Plaid, Finicity, or MX to pull real-time checking and savings account data with customer permission. This can enable cash flow underwriting for small personal loans, credit cards, or small business loans.

3. Integrate Alternative Data into Manual Underwriting

For institutions not ready to adopt full alternative scoring models, underwriters can begin using rent, utility, and bank statement data in exception-based decisions or as compensating factors for borderline credit files.

4. Educate Members and Borrowers

Create marketing and financial education campaigns to inform customers that their rent and utility payments can now help them qualify for loans. Transparency builds trust and increases opt-in rates.

5. Conduct a Pilot Program

Select a product line—such as personal loans under $5,000—and test alternative data scoring on a small scale. Use internal benchmarking to assess default rates, borrower satisfaction, and ROI.

6. Ensure Regulatory Compliance

Collaborate with compliance and legal teams to ensure that all alternative data use complies with the Fair Credit Reporting Act (FCRA), ECOA, and other applicable laws. Use only consumer-permissioned data and ensure you maintain fair lending oversight.

7. Use Hybrid Scoring Models

Adopt tools that integrate both traditional credit data and alternative data into a single risk model. This provides a more holistic picture and improves risk segmentation without abandoning conventional risk management practices.

8. Leverage CUSOs or Vendor Partnerships

If your internal resources are limited, work through a Credit Union Service Organization (CUSO) or regional banking associations to access shared vendor resources or deploy collaborative technology.

Conclusion

The use of alternative data in credit decisioning is not just a fintech trend — it’s a necessary evolution to ensure equitable access to financial services. For community banks and credit unions, embracing these tools can unlock new markets, reduce reliance on traditional credit bureaus, and offer tailored credit options for the next generation of borrowers.

By starting small and building a compliant, transparent framework, these institutions can stay competitive and deepen member relationships. All while continuing to serve their core mission of supporting community growth.

Policy Management

Why policy management is a strategic advantage for financial institutions

Written by admin on . Posted in Blog, Management & Planning.

By Karen Hevesi; Education & Products Manager, Young & Associates

In today’s financial landscape, policy management is more than a compliance exercise; it’s a strategic necessity. As regulations evolve, technology reshapes operations and risk profiles grow more complex, financial institutions must adopt a robust and transparent policy framework. Poorly managed policies can lead to compliance gaps, operational inefficiencies, and reputational damage.

Why Policy Management Matters

Policies Organization

Effective policy management is a dynamic process that requires centralization, regulatory alignment, stakeholder engagement, and integration with risk frameworks. Adopting these best practices, financial institutions can reduce compliance risks, improve operational efficiency, and maintain trust with regulators and customers.

To build a policy management system that withstands pressure, financial institutions should follow best practices that strengthen oversight and support efficient operations.

Policy management is a critical discipline in the financial sector. It shapes how institutions control risk, meet regulatory expectations, and operate with integrity.

Banks, brokers, insurers, credit unions, asset managers, and fintech firms all depend on policies to guide decisions and protect customers. Weak or outdated policies expose the entire organization, while strong, actively managed policies foster structure, consistency, and trust.

Responding to an Evolving Regulatory Environment

Regulatory expectations face pressure because governing rules frequently change. Regulators update guidance, markets shift, and new threats appear without warning. This makes policy management more than a documentation task. It is a full lifecycle process that demands attention, clarity, and coordination across the entire business.

Many financial institutions struggle with policies. Policies should use clear language, follow a logical order, and focus on what employees must do, not just what the law says. Clarity reduces errors, streamlines training and onboarding, and minimizes the back-and-forth that slows daily operations. Without firm policies, financial institutions risk fines, reputational damage, and operational failures.

Clarity and Structure Build Strong Policies

A policy alone has little force unless it translates into real action. Effective policy management links each policy to the procedures and controls that support it. This means mapping not only what must be done, but how it is done and who does it. Integration ensures the institution follows the policies consistently and can prove compliance during audits.

Scattered documents create risk. Employees need confidence that they’re viewing the most current version of a policy when searching for a rule. A centralized, well-organized policy library eliminates uncertainty and helps staff find the information they need fast. It also supports audit trails that track when a policy was revised, who approved it, and what changed.

Training should not end after onboarding. In the financial industry, policy understanding needs constant reinforcement. Best practice combines general compliance training with role-specific instruction that covers the policies most relevant to each team. When policies change, training updates should follow quickly. Short refreshers, case examples, and scenario-based learning help employees apply policies correctly in real conditions. The goal is not just reading but understanding.

Version Control and Ongoing Reviews

Regulators expect full visibility into how and why a policy changes. Every edit, comment, approval, and retirement decision should be documented.

Version control creates a clear historical record that demonstrates responsible policy management. During audits or examinations, this documentation becomes one of the most valuable tools a financial institution can provide.

Policies should be reviewed annually to ensure accuracy, relevance and alignment with current risks. A policy written three years ago might still be correct on paper but completely misaligned in practice. Routine reviews help institutions identify outdated references, process changes, and new vulnerabilities. Testing policies in real-world scenarios strengthens them. For example, a compliance team might walk through how a fraud policy operates during a sudden surge in suspicious activity. Stress tests reveal blind spots before they become incidents.

Adapting Policy Management for the Future

Policies do not live within a single department. Risk, compliance, legal, operations, technology, HR, and business lines all shape how policies work in practice. Collaboration ensures policies align with real workflows and reflect the risks teams face daily. When everyone understands the implications, the policies become stronger and easier to implement.

The financial industry will continue to evolve. Technology advances, new risks emerge, and global regulatory pressure intensifies.

Policy management must keep pace. Institutions that treat policies as strategic assets rather than paperwork protect themselves from compliance failure and operational disruptions. In a competitive financial landscape, trust is an advantage. Strong policy management builds that trust from the inside out. In an era of constant change, policy management remains the foundation of compliance, risk mitigation, and public trust.

Artificial Intelligence

How artificial intelligence can transform loan underwriting

Written by admin on . Posted in Blog, Lending & Loan Review.

By Justin Schray; Credit Analyst, Y&A Credit Services

Artificial Intelligence (AI) has been solving problems and answering complex prompts for decades, but today, its presence is ubiquitous. From internet search engines and social media platforms to classrooms and corporate offices, AI has become embedded in our daily lives. Its potential across industries is immense — but how can it specifically benefit financial institutions, particularly in loan underwriting?

Uses and Potential

Traditional underwriting methods are often inconsistent due to the subjective influence of individual analysts’ opinions and judgments. In contrast, AI employs advanced algorithms and machine learning techniques to assess vast datasets and deliver consistent, policy-aligned decisions.

By automating key processes, AI enables banks and other lenders to provide more personalized and responsive service to both prospective and current clients. Through rapid data analysis, AI can process credit scores, tax returns, employment histories, and more, organizing this information in a way that still adheres to sound risk assessment and forecasting standards. As a result, financial institutions spend significantly less time on manual data entry — potentially reducing loan approval timelines from several weeks to just a few days.

Beyond data collection and efficiency, AI also supports institutions in risk assessment and fraud detection. Machine learning models can identify patterns in historical data and monitor them in real time. This enhanced detection capability allows lenders to address potential issues — whether with an individual borrower or an entire industry — much earlier in the lending process.

In addition to decision-making support, AI tools are now capable of generating automated risk reports, financial spreads, and executive summaries. While risk managers remain in control of final lending decisions, AI expedites the process, enabling more timely and data-informed conclusions.

AI infographic

How can AI be implemented?

For a financial institution to effectively implement AI, it must first identify its own operational inefficiencies or pain points.

AI should be adopted with a clear strategic purpose — not simply because it’s a trending technology.

4 questions Institutions must consider:

  • What functions will AI support?
  • Who will have access to AI tools?
  • Do existing policies need to be revised?
  • Is current software infrastructure compatible with AI integration?

Establishing a formal roadmap is essential. This includes selecting use cases, identifying key stakeholders, developing integration timelines, and planning staff training. Leadership must champion this transformation to ensure institutional alignment and accountability.

Once the AI system is tested and rolled out, continuous monitoring becomes critical. Risk managers and analysts should review performance data, offer feedback, and contribute to ongoing model improvements. This feedback loop will refine the AI’s accuracy and effectiveness while enhancing the institution’s ability to mitigate credit and operational risk.

Is it safe?

AI systems are designed to manage and interpret large volumes of data, but maintaining the security and privacy of that data is paramount. Financial institutions bear legal and reputational responsibility for safeguarding customer information, and any breach could lead to serious consequences.

One of AI’s strengths is real-time threat detection. AI tools can detect anomalies, flag suspicious behavior, and allow for swift responses. These systems can also predict potential breaches using historical trends and, if configured appropriately, initiate automated responses—such as isolating compromised systems or blocking malicious content.

The U.S. National Security Agency’s Artificial Intelligence Security Center (AISC) recommends integrating AI-powered security protocols early in the adoption process. According to IBM, the average cost of a data breach in the United States reached $9.36 million in 2024, with 95% of breaches motivated by financial gain. Institutions that employed AI-based security tools reportedly saved an average of $2.2 million per breach—underscoring the value of proactive AI implementation in cybersecurity.

Conclusion

AI offers transformative potential for financial institutions, particularly in loan underwriting. From enhanced decision-making and fraud detection to improved client service and operational efficiency, AI allows lenders to modernize their workflows while minimizing risk. With careful planning, secure implementation, and ongoing evaluation, AI can be a powerful asset in the future of banking and credit services.

2026 Rescission Calendar – Free download now available

Written by admin on . Posted in Advice, Announcements, Blog, Compliance & Regulations, Consultation, Lending & Loan Review, News.

The right of rescission, governed by Regulation Z under the Truth in Lending Act (TILA), remains a cornerstone of consumer protection in the lending industry. For financial institutions, ensuring compliance with rescission rules is not only a regulatory requirement but also a reflection of their commitment to protecting borrowers’ rights. However, the intricacies of rescission — covering timing, disclosure requirements and exceptions — can make this area of compliance challenging for many lenders.

To support your institution in navigating these complexities, Young & Associates offers a free downloadable Rescission Reference Chart. The chart is designed to simplify compliance with rescission rules.



Click Here to Get Your 2026 Rescission Calendar

 

What is the 3 Day Right of Rescission?

The right of rescission provides consumers with the ability to cancel certain credit transactions that involve a lien on their principal dwelling. This cooling-off period, typically three business days, is intended to allow borrowers time to evaluate the terms of their transaction without pressure. While the concept is straightforward, compliance involves navigating strict rules related to timing, notification and disclosure.

Common challenges in rescission compliance

Despite its importance, rescission often presents challenges for financial institutions. Here are some common issues:

  1. Identifying covered transactions
    Not all transactions are subject to rescission. Determining whether a loan qualifies—such as refinances or home equity lines of credit—requires careful evaluation of loan terms and lien positions.
  2. Proper timing of the rescission period
    The rescission period must be calculated accurately, taking into account business days and excluding holidays. Miscalculations can result in compliance violations.
  3. Providing accurate and timely disclosures
    Borrowers must receive clear and complete rescission notices and required disclosures at the time of closing. Any inaccuracies can extend the rescission period or expose the lender to liability.
  4. Handling rescission notices
    If a borrower exercises their right to rescind, lenders must act swiftly to return funds and terminate the lien within 20 calendar days. Delays or errors in this process can lead to penalties.

How do you calculate a 3 day rescission period?

The rescission period typically begins the business day following the signing of loan documents and ends at midnight on the third business day.

How the calendar can help

Young & Associates’ Rescission Reference Chart is a comprehensive tool that simplifies the complexities of rescission compliance. This chart provides:

  • A clear breakdown of covered and exempt transactions.
  • Guidelines for accurately calculating the rescission period.
  • Tips for ensuring proper disclosure and handling rescission notices.

This chart offers a practical and easy-to-use resource to enhance your compliance program. It can assist in training new staff or refreshing your understanding of rescission rules.

Why rescission matters

Non-compliance with rescission rules can result in extended rescission periods, regulatory scrutiny or even legal action. Ensure your institution has a solid grasp of rescission requirements. Not only to avoid potential risks but also to reinforce your reputation as a trusted and reliable lender.

Download free today

Young & Associates is dedicated to helping financial institutions like yours maintain compliance while streamlining operations. Our Rescission Reference Chart is just one of the many tools we offer to support your success. Equip your team with the knowledge and tools they need to navigate rescission with confidence. With Y&A by your side, you can focus on serving your customers while staying compliant with ease.

How recent CFPB guidance changes affect financial institutions

Written by admin on . Posted in Blog, Compliance & Regulations.

By Bill Elliott, CRCM; director of compliance education, Young & Associates

Since its inception in 2011, the Consumer Financial Protection Bureau (CFPB) has responded to a wide range of issues — even without an act of Congress, such as with the Truth in Lending Act. The agency has relied on compliance bulletins, advisory opinions, interpretive rules and circulars to provide information regarding priorities and interpretations of federal consumer financial laws.

With a new administration in Washington, the CFPB has gone through a long and difficult transition that (as of this writing) is still not complete. Pending lawsuits and uncertainties created by the administration may cause additional changes, so changes in the agency may continue.

The original plan for the agency was to have a measure of independence from the natural changes from administration to administration. Over the last 14 years, mostly through court cases, the agency’s independence has eroded. The actions discussed below are, at least at some level, the direct result of that erosion.

Latest CFPB guidance changes

CFPB Acting Director Russell Vought
CFPB Acting Director Russell Vought

On May 12, 2025, CFPB Acting Director Russell Vought announced the withdrawal of 67 guidance documents, consisting of:

  • Eight policy statements
  • Seven interpretive rules
  • 13 advisory opinions
  • 39 other guidance documents such as circulars and bulletins

The reasoning behind this action was that policies implemented by guidance represent an unfair regulatory burden and might be contrary to federal law.

“In many instances, this guidance has adopted interpretations that are inconsistent with the statutory text and impose compliance burdens on regulated parties outside of the strictures of notice-and-comment rulemaking,” Vought said. “But even where the guidance might advance a permissible interpretation of the relevant statute or regulation, or afforded the public an opportunity to weigh in, it is the Bureau’s current policy to avoid issuing guidance except where necessary and where compliance burdens would be reduced rather than increased.”

Vought further outlined the new policy and the reasons for it:

  • The CFPB commits to issuing guidance only when that guidance is necessary and would reduce compliance burdens rather than increase them. “Historically, the Bureau has released guidance without adequate regard for whether it would increase or decrease compliance burdens and costs,” he wrote. “Our policy has changed.”
  • The CFPB commits to reducing its enforcement activities in conformance with President Trump’s directive to deregulate and streamline bureaucracy. He noted that many of the CFPB’s enforcement responsibilities overlap or duplicate other state and federal regulatory efforts.
  • “Finally, to the extent guidance materials or portions thereof go beyond the relevant statute or regulation, they are unlawful, undermining any reliance interest in retaining that guidance,” he said.

This may not signal the demise of all 67 items. The CFPB stated it intends to continue reviewing these guidance documents. Some may ultimately be reinstated, at least in part. Until that happens, the CFPB and presumably all other banking regulators will not enforce or otherwise rely upon the guidance documents.

A closer look at the CFPB withdrawals

Many of these withdrawn guidance documents received justified criticism. For example, the Bureau withdrew the 2024 circular titled Improper Overdraft Opt-In Practices. This document imposed additional requirements, well beyond what the regulation requires, on institutions’ record-keeping practices. This occurred without going through formal notice-and-comment rulemaking under the Administrative Procedure Act.

Two other notable withdrawals:

The first involves Unfair, Deceptive or Abusive Acts or Practices (UDAAP) concerns with digital platforms involving non-mortgage consumer financial products and services.

Although the CFPB removed this document, it kept an advisory opinion that addresses similar UDAAP concerns and Real Estate Settlement Procedures Act (RESPA) Section 8 issues for digital platforms offering mortgage products.

The second rescission involved the issue of sexual preference under Regulation B. Sexual preference should never be a reason for denying a loan, but some may interpret rescission of that document as removing some protections for that segment of the lending public.

In spite of these removals, the CFPB continues to pursue cases involving consumer reporting, online installment lending, mortgage lending and debt collection.

CFPB priorities

In April 2025, Mark Paoletta, chief legal officer of the CFPB, sent a memorandum to all staff setting forth the priorities of the new leadership.

Key aspects of the priorities include the following:

  • A shift back to prioritizing banks over nonbanks and enlisting the states to conduct supervision and enforcement over nonbanks.
  • A focus on mortgages (highest priority), consumer reporting, debt collection, fraudulent overcharges and fees.
  • A deprioritization of peer-to-peer platforms and lending, consumer data, remittances and digital payments, among other areas.

If you would like to review the entire CFPB document, you can find it here.

Contact Young & Associates today at consultants@younginc.com if we can assist in any way with these or any other regulatory compliance issues.

The importance of appraisal reviews in protecting financial institutions

Written by admin on . Posted in Blog, Risk Management.

By Casey Simpson; consultant and manager of appraisal review services, Young & Associates

In the real estate industry, accurate and unbiased property appraisals are critical. These influence lending decisions, investment strategies, tax assessments and legal outcomes. Appraisal reviews are a safeguard for financial institutions, investors and the public. Additionally, the regulators outlined this process as a requirement.

Accurate and unbiased property appraisals drive critical decisions in lending, investment strategies, tax assessments and legal outcomes. Appraisal reviews provide safeguards for financial institutions, investors and the public, and regulators mandate the process.

Although appraisal value thresholds have changed over time, the obligation to review appraisals has not. Financial institutions must still conduct a review whenever an appraisal supports a transaction.

The Interagency Appraisal and Evaluation Guidelines from 2010 specifically states, “As part of the credit approval process and prior to a final credit decision, an institution should review appraisals and evaluations to ensure that they comply with the Agencies’ appraisal regulations and are consistent with supervisory guidance and its own internal policies. This review also should ensure that an appraisal or evaluation contains sufficient information and analysis to support the decision to engage in the transaction.”

Appraisal Disciplinary Actions chart
Disciplinary cases show that nearly all appraisal deficiencies could have been remediated or prevented through proper reviews. Data: Ohio Appraiser Disciplinary Actions 2020-2025

What are real estate appraisal reviews?

A real estate appraisal review evaluates an appraisal report for completeness, accuracy, consistency and compliance with applicable standards.

Qualified professionals who are independent from the subject transaction and have experience in the relevant property type should perform appraisal reviews to maximize the benefits. Use consistent review checklists with a clear understanding of the client’s scope of work. Align with client-specific requirements and regulatory compliance. Provide a detailed narrative of the transaction appraisal that documents findings and highlights deficiencies or recommendations.

Key benefits of real estate appraisal reviews

  • Enhances accuracy and reliability: Errors, omissions, or flawed assumptions in an appraisal can result in inaccurate valuations. A review identifies discrepancies and unsupported conclusions to ensure the final report is accurate and defensible.
  • Mitigates financial risk: For lenders and investors, misvalued properties carry significant risks. Reviews serve as a risk.
  • Ensures regulatory and standards compliance: Financial institutions are subject to strict regulatory requirements, including the Uniform Standards of Professional Appraisal Practice (USPAP), the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Appraisal reviews help ensure compliance with these requirements, protecting the institution from legal or regulatory penalties.
  • Improves consistency across valuations: For organizations managing multiple appraisals, reviews promote consistency in methodology, terminology and value conclusions. This supports transparency and establishes quality standards.
  • Cost limitations: Financial institutions with qualified in-house reviewers can use them as a resource to reduce risk. However, third-party providers can provide review services, with costs passed on to the customer as a line item on the closing settlement sheet.

Regulatory compliance explained

Uniform Standards of Professional Appraisal Practice (USPAP)

The purpose of USPAP is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. It sets forth standards for all types of appraisal services, including real property, personal property, business, appraisal review and mass appraisal. It is essential that appraisers develop and communicate their analyses, opinions and conclusions to intended users in a manner that is meaningful and not misleading. (source: www.appraisalfoundation.org and www.appraisers.org)

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Commonly known as Dodd-Frank, it is legislation that was passed by the U.S. Congress in response to financial industry behavior that led to the financial crisis of 2007–2008. It sought to make the U.S. financial system safer for consumers and taxpayers. It established a number of new government agencies tasked with overseeing the various components of the law and, by extension, various aspects of the financial system. The Dodd Frank Act aimed to protect the independence of appraisers, reasonable and customary appraisal fees, appraiser certification and education standards, requirements for Appraisal Management Companies (AMC’s), standards for Automated Valuation Models (AVMs) and Broker Price Opinions (BPOs), additional provisions for high-risk mortgages, among other issues. (source: www.investopedia.com by Adam Hayes updated February 01,2025 and Regulatory Issues Facing the Real Estate Appraisal Profession)

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

FIRREA has reshaped lending practices, particularly in real estate and mortgage financing. Lenders must adopt rigorous underwriting standards to ensure loans are extended to creditworthy borrowers, reducing the risk of defaults and enhancing financial system stability. Certified appraisals are now required to ensure accurate property valuations, critical for mitigating systemic risk in mortgage-backed securities. (source: www.accountinginsights.org Published Feb 13, 2025 and Regulatory Issues Facing the Real Estate Appraisal Profession)

Financial institutions face heightened risk if appraisals are not thoroughly reviewed. Independent reviews reduce risk, ensure adherence to standards and save valuable staff time. At Young & Associates, we provide independent appraisal reviews that give your team confidence in lending decisions while reducing compliance burdens. Let Young & Associates help you navigate appraisal compliance with confidence and efficiency. Reach out for a consultation.

Intel’s Ohio investment creates opportunity for economic growth and lending

Written by admin on . Posted in Blog, Lending & Loan Review.

Digital render of Intel's new facility
Digital render of Intel’s new facility located in Central Ohio. Photo courtesy of Intel

By Alex Heavner; Credit Analyst, Young & Associates

Intel is transforming nearly 1,000 acres in New Albany, Ohio, with a $28 billion investment in two advanced chip factories. The site will produce some of the industry’s most advanced semiconductor processors. Ground broke on the project in 2022, with completion anticipated by 2027.

The benefits of a tech giant like Intel establishing a presence in Central Ohio are vast. The direct economic impact begins with the creation of more than 7,000 construction jobs. Once operational, Intel expects to employ at least 3,000 individuals on-site or remotely. Beyond these, more than 10,000 directly impacted workers in the surrounding communities will experience significant growth in the years to come.

Intel intends to onboard more than 350 Ohio-based companies into its supply chain. Small businesses, franchises and startups are expected to flock to the area to capitalize on the expanding ecosystem. Intel’s investment may create tens of thousands of new jobs in industries beyond its own.

Intel has also committed $100 million to support educational initiatives in Ohio, aimed at developing a skilled talent pipeline and strengthening local research institutions. As of May 2025, $17.7 million of that commitment has been allocated. This funding has awarded more than 2,300 scholarships and helped educate over 9,000 students through partnerships with more than 80 colleges and universities. In addition, Intel is rolling out Khanmigo, an AI-powered tutor and teaching assistant, to select middle and high schools.

How Intel helps construct opportunity

According to comprehensive economic models, Intel’s presence is expected to increase Ohio’s GDP by $2.3 billion annually. A significant portion of this growth will stem from the rise in local business development — creating a surge in demand for commercial construction and property development financing.

New Albany is uniquely positioned for this expansion. It is the only Columbus suburb where commercial land use outpaces residential, with 43 percent allocated to business and 31 percent to housing. The city actively seeks to reduce the residential tax burden by increasing commercial revenue, which currently comprises more than 80 percent of the city’s general fund — largely derived from income taxes collected in the business park. This commercial focus directly contributes to enhanced infrastructure, services and quality of life for residents.

Lending: The backbone of community growth

None of this economic potential is realized without one critical component: access to capital. Lending is the engine that turns opportunity into action.

Contractors, electricians, HVAC technicians and landscapers will need financing to purchase or lease vehicles and equipment essential for their trades. Many will also rely on financing for payroll and up-front material costs during lengthy projects.

Restaurants, retailers and healthcare providers require funding to secure land, finance construction, purchase equipment and obtain the necessary licenses to open and operate. In short, every facet of the economy will be touched by lending.

Construction lending, however, carries unique risks. Delays caused by weather, labor shortages or supply chain disruptions are common. Rain could halt progress for a week and time lost is money lost. These interruptions can jeopardize loan repayment and force lenders to make difficult decisions — continue funding, renegotiate terms or sell the loan to mitigate losses.

Additionally, fluctuating material costs and unforeseen expenses can lead to budget overruns. Mismanagement could prevent borrowers from repaying loans, increasing the risk of default. While the unfinished structure typically serves as collateral, its incomplete status may significantly reduce its resale value, leaving lenders exposed.

To manage these risks, financial institutions employ construction inspectors who monitor progress and confirm that funds are being used appropriately. Construction loans are structured with draw schedules — funds are released only after specific milestones are verified. Borrowers often self-fund the initial project phase or may apply for a mobilization draw, a smaller, closely monitored loan intended to cover startup expenses.

Fueling small business growth

Not all small businesses will qualify for traditional loans. That’s where Small Business Administration (SBA) programs come into play.

SBA 7(a) loans provide up to 85 percent loan guarantees, significantly reducing the lender’s risk and encouraging lending to small and growing businesses. These guarantees are not a safety net for default. Borrowers are still held accountable and collateral is pursued before the SBA covers any shortfall.

SBA 504 loans offer another avenue, providing long-term, fixed-rate financing for purchasing real estate, buildings and large equipment. These options are crucial for entrepreneurs looking to seize the opportunities Intel’s investment is creating.

Intel’s investment prepares Central Ohio for progress

Financial institutions are proactively expanding their operations in Central Ohio to meet the demands of this unprecedented economic growth. Many are opening regional hubs, hiring local talent and leveraging advanced technologies to streamline services and improve responsiveness.

For instance, Wells Fargo has established a new technology center in the Easton area of Columbus, expected to generate up to 500 jobs with average annual salaries of $125,000. Regional and community banks are also taking strategic steps, such as partnering with colleges and universities to strengthen talent pipelines and improve workforce readiness.

Institutions are embracing fintech and artificial intelligence (AI) to enhance efficiency, accuracy and scalability. AI tools now support underwriting decisions, smart contract development through blockchain improvements and embedded finance integration — all essential for staying competitive in a fast-evolving market.

Intel creates strategic positioning for financial institutions

To fully capitalize on the economic momentum generated by Intel’s investment, financial institutions must act strategically, proactively positioning themselves to serve both the direct and peripheral financial needs arising in the region. This includes preparing for a substantial increase in commercial lending activity, establishing competitive advantages and reinforcing operational infrastructure.

  1. Expand commercial lending capabilities: Assess commercial lending teams and workflows. Strengthen underwriting capacity and approval efficiency to handle increased loan volume.
  2. Build industry expertise: Develop knowledge of construction, SBA and commercial real estate lending. Partner with experts like Young & Associates for guidance and training.
  3. Strengthen risk management and compliance: Update credit policies, perform stress testing and enhance compliance programs. Ensure regulatory readiness in areas like CRA, fair lending and BSA/AML.
  4. Invest in scalable technology: Modernize systems to improve loan origination, analytics and customer experience. Utilize AI and data tools to increase capacity without sacrificing quality.
  5. Forge local and regional partnerships: Build relationships with developers, contractors and municipalities for early insight and lending opportunities.
  6. Prepare for talent demands: Plan for increased hiring needs. Launch internship programs and partnerships with universities to attract future talent.

Opportunity meets expertise

At Young & Associates and Y&A Credit Services, we support financial institutions navigating increased demands brought on by the Intel development and broader regional growth. Our decades of experience allow us to provide highly specialized consulting in areas such as underwriting, risk management, regulatory compliance and operational scalability.

Our consultants are well-versed in both national regulations and Ohio’s unique financial environment. We remain committed to helping community financial institutions capitalize on opportunity while remaining compliant, competitive and resilient.

Breaking down agricultural production revenue cycles for ag lending

Written by admin on . Posted in Blog, Lending & Loan Review.

By Craig Horsch, Consultant, Young & Associates

With Ag borrowers facing tight margins in 2025, financial institutions must carefully examine agricultural production revenue cycles to measure each borrower’s actual crop and livestock production against annual projections.

Additionally, measuring and testing each different revenue stream the farmer produces crops (corn, soybeans, wheat, oats, milo, hay, etc.) or livestock (beef cattle, dairy cattle, hogs, chickens, turkeys, sheep, goats or other livestock)

Financial institutions have historically analyzed the grain crops (corn, soybeans, wheat, oats, milo, hay, etc.) revenue production cycle very well; however, livestock revenue streams are not as frequently monitored to evaluate the borrower’s efficiencies within their respective revenue production cycles.

Analyzing the agricultural production revenue cycles

Measuring the revenue production cycles also provides the bank with an opportunity to identify the following:

  • Assess the borrower’s management skills.
  • The accuracy of the borrower’s projections.
  • The efficiencies within the production cycle.
  • The weakness within the production cycle.
  • Financial trends (negative or positive) within the production cycle.
  • Compare actual performance with projected revenue and expenses.
  • Where did the production cycle provide a benefit to the operations?
  • Where did the production cycle provide a detriment to the operations?
  • Were there any surprises (positives or negatives) during the production cycle?
  • Were projections within 10 percent of the actual performance?
  • Were there any critical or unusual events that occurred during the production cycle that negatively impacted revenue?

When underwriting an Ag borrower, consider analyzing and discussing each of the borrower’s revenue streams that contribute toward the repayment of the loan, such as the number of livestock or acres they farm overall, acres owned and leased, the projections for the upcoming year and the percentage each revenue stream contributes to the overall revenue stream. If livestock, discuss the type of livestock (dairy, beef, hogs, chickens, turkey, sheep, goats, etc.), the number of head, if a cow/calf (beef or dairy cattle) or dairy operation, a farrowing only, a finishing only or a farrow to finishing (hogs), a poultry or other livestock operation.

The USDA-ERS projects 2025 net farm income at $179.8 billion, up $52 billion from last year on record livestock prices and government payments.Not all sectors share in the gain. Crop receipts are forecast to fall 2.5 percent, led by declines in corn, soybeans and wheat, while fruits, nuts and cattle continue to rise. These swings, shown in the chart, reflect a long history of volatility. For lenders, the bottom line is clear: repayment risk depends on where borrowers are in the cycle, not just on headline numbers.
The USDA-ERS projects 2025 net farm income at $179.8 billion, up $52 billion from last year on record livestock prices and government payments. Not all sectors share in the gain. Crop receipts are forecast to fall 2.5 percent, led by declines in corn, soybeans and wheat, while fruits, nuts and cattle continue to rise. These swings, shown in the chart, reflect a long history of volatility. For lenders, the bottom line is clear: repayment risk depends on where borrowers are in the cycle, not just on headline numbers.

Discuss production projections for the upcoming year or the number of turns per year (hogs & poultry), etc. By completing this analysis, the bank may be able to identify which revenue stream is the strongest and weakest and which is the largest and smallest contributor to the overall revenue stream.

Identify the sources of revenue, such as grain, dairy, beef, hogs, poultry, sheep, goats or other livestock. Indicate each source’s share of total production in dollar amounts or percentages and explain how often the cycle for each source is completed. It is important to confirm that the producer is accurately capturing pertinent data for each revenue stream.

Projections vs. reality in agricultural production revenue cycles

Compare the production cycle actual performance with the borrower’s projections for the ag related cycle being measured.

  • Are they very accurate based upon the conditions of the respective cycle?
  • Is their revenue production within 10 percent of their budgeted projections?
    1. This is a way to assess the borrower’s budgeting capabilities
    2. Farm management skills
    3. Knowledge of costs
    4. Are they realistic pricing costs & selling commodity prices?
  • Do they know their costs?
  • Provide a look-back period: Are their projections reasonable compared to their actual costs?

Stress Test the borrower’s projections by 10 percent on price and 10 percent on yield to determine where the projected cash flow would be if a major adverse event occurred during the crop or livestock cycle, such as drought, bird flu, hoof & mouth, mastitis, etc.

By analyzing each revenue cycle, banks can identify strengths and weaknesses in a borrower’s management, budgeting, marketing and knowledge of costs and markets, thus improving the credit risk analysis of current or requested facilities.

The risk of requiring guarantors: ECOA and Regulation B explained

Written by admin on . Posted in Blog, Compliance & Regulations.

By William J. Showalter, CRCM; senior consultant, Young & Associates

You would think after nearly 50 years, we could get this one right. The law passed in the mid-1970s and the rules for additional signatures have not really changed since. But, joint signature issues comes up regularly at banks, thrifts and other lenders to this day. Regulation B, which implements the Equal Credit Opportunity Act (ECOA), is pretty straightforward on this point.

Regulation B explained

Regulation B prohibits a lender from requiring an additional signer, especially a spouse, if an applicant qualifies for individual credit on his or her own merits. State law may require a joint owner of collateral to sign documents the lender reasonably believes are necessary to perfect its security interest. Generally, the co-owner must sign some form of security agreement or mortgage deed. However, check with your legal counsel to verify what signatures you need to perfect a security interest.

We have heard of many financial institutions having gender and marital discrimination issues cited in examinations. Your examiners clearly are looking at these issues and are finding problems.

Sex and marital status discrimination

The ECOA prohibits discrimination against loan applicants and customers on any of nine “prohibited bases,” including the original pair – sex and marital status. These aspects of applicants have nothing to do with creditworthiness.

There are a number of ways to discriminate along gender or marital status lines, including:

  • Refusing to grant credit or extending it on less favorable terms to female applicants.
  • Requiring cosigners for female applicants, regardless of creditworthiness.
  • Aggregating incomes and financial resources for married joint applicants but not for unmarried joint applicants.
  • Refusing to allow an applicant to choose to obtain credit using a birth-given surname, a married surname or a combined surname.
  • Terminating or changing an open-end account, without any evidence of inability or unwillingness to repay the debt when a customer’s marital status changes.
  • Requiring a spouse as a co-borrower for a married applicant.
  • Requiring spouses of married officers of a company to sign loan guarantees with the officers.

Blind spot

The spousal signature issue seems to challenge lenders, particularly commercial lenders, the most in the sex/marital status discrimination area. As noted above, a lender cannot require an applicant’s spouse or any other additional party to sign a debt instrument if the applicant meets creditworthiness standards without the extra signature.

Yet examiners still hear of senior bank managers and lenders who try to ‘tie up’ borrowers by requiring as many signatures as possible, often including spouses’ signatures on the note or guarantee. Bank and thrift examiners continue to find spousal signatures on notes or guarantees without any explanation in the file.

This practice—requiring a signature simply because the applicant is married—constitutes substantive discrimination and disparate treatment based on marital status. It harms the applicant, who cannot obtain individual credit, and the spouse, who must incur personal liability for a loan never sought and never required their signature.

In 2018, only one Federal Financial Institution Examinations Council (FFIEC) agency, the National Credit Union Administration (NCUA), referred a case of ECOA discrimination to the Department of Justice. That single referral followed 89 referrals from other agencies over the previous five years.

Significantly, the NCUA made its referral on the basis of marital status discrimination.

Regulatory response to Regulation B

In March 2003, the Federal Reserve Board (FRB) revised its Regulation B, which implements the ECOA to really just say, “We mean business. We mean what we have said for years and years.”

The Official Staff Commentary on Regulation B already stated that the fact that an applicant submits a joint financial statement may not be used to presume the application is for joint credit. With the 2003 amendments, the FRB revised Regulation B itself to say the same thing, since the FRB stated that commercial lenders, in particular, had not seemed to get the point.

To further make this point, the FRB added a requirement that a lender have some form of documentation for any additional signatures. The Commentary requires applicants to show their intent to apply for joint credit at the time of application. A promissory note signature does not prove intent to apply for joint credit. Applicants can establish intent with signatures or initials on a credit application, or on a separate form affirming their intent to apply for joint credit. The FRB (and now the Consumer Financial Protection Bureau, CFPB) requires a method of establishing intent that is distinct from the process of affirming the accuracy of information. Joint signatures at the end of an application are usually not enough.

The Commentary also states that lenders may not assume a borrower will transfer property title to remove it from collectors’ reach. The message—seemingly aimed at commercial lenders—is clear: using spousal guarantees to shore up a loan is not an acceptable way to underwrite business credit. Prudent, safe, and sound credit underwriting requires taking a security interest in property that supports the loan, rather than relying on guarantees that amount to little more than a moral commitment in bankruptcy court.

Other regulatory help for Regulation B

The Federal Deposit Insurance Corporation (FDIC) issued two Financial Institution Letters (FIL) with guidance on Regulation B’s spousal signature requirements to assist lenders in complying with their obligation to treat applicants fairly. Both are now classified as inactive – apparently as part of an effort to lessen regulatory burden several years ago – but still contain relevant and current guidance.

The earlier FIL (FIL-9-2002) includes steps financial institutions can take to avoid problems with the signature rules. Lenders should review and revise loan policies and procedures to eliminate those that are inconsistent with the spousal signature rules.

Specifically, those that require the:

  • Guarantee of a loan to a closely held corporation by the spouses of the partners, officers, directors or shareholders of the corporation.
  • Signature of the spouse on the note when the applicant submits a joint financial statement.
  • Signature of the spouse on the note when jointly owned assets are offered as collateral.

This FIL also advises lenders to add guidance on state law regarding what signatures are necessary in particular situations. Loan staff should be trained periodically on these rules to ensure they remain aware of what is expected and how to avoid compliance trouble. The FIL also recommends that compliance reviews include checks for spousal signature violations, particularly in loans to closely held corporations and in business loans supported by jointly owned property.

The later FIL (FIL-6-2004) includes a flowchart that guides lenders through the process of deciding when an additional signature may be required and when it is not.

Both issuances are available on the FDIC’s website under Inactive Financial Institution Letters. They can help all financial institutions — not just those directly supervised by the FDIC — avoid problems in this important area.

If we can help, please feel free to contact us.

What financial institutions need to know about the rise of digital lending

Written by admin on . Posted in Blog, Lending & Loan Review.

By Justin Schray; Credit Analyst, Young & Associates

Visiting a local bank or credit union isn’t always practical anymore. Mobile and digital lending platforms are reshaping financial services, giving consumers faster, more convenient and accessible options. Fintech leaders like SoFi, PayPal and Kabbage are driving this shift, using technology to meet borrowers’ changing needs.

One of the most significant advantages of mobile and digital lending is convenience. These platforms allow users to apply for loans, transfer funds and communicate with customer service representatives — all from the comfort of their home or while on the go. The digital loan application process is typically much faster than traditional methods, often delivering approvals within minutes. Furthermore, all necessary documentation is stored securely online, reducing the need for physical paperwork and enabling borrowers to access their information at any time.

Digital lending platforms also offer a wider range of services and investment opportunities. For example, many now provide “buy now, pay later” options, which are particularly popular among consumers making discretionary purchases, such as during vacations or seasonal shopping. Platforms like Kiva focus on providing microloans to entrepreneurs and small businesses, supporting underserved markets and fostering economic growth. This diversity in offerings ensures that digital lending can cater to a variety of financial needs and consumer preferences.

How financial institutions can compete and adapt to digital lending

To remain competitive in this evolving landscape, traditional financial institutions must invest in digital transformation initiatives that align with both consumer expectations and regulatory frameworks. While fintech’s have led the charge in agility and innovation, banks and credit unions can leverage their established reputations, trust and infrastructure to deliver equally compelling digital lending experiences.

Key steps institutions should take include:

  • Invest in digital infrastructure: Banks must adopt modern loan origination systems (LOS), mobile banking platforms and secure cloud-based storage to replicate the speed and accessibility offered by fintechs.
  • Partner with fintech providers: Collaborations with third-party technology vendors can accelerate the rollout of digital lending capabilities. Many vendors offer white-label or integrated solutions that align with the institution’s branding and compliance requirements.
  • Enhance user experience: Developing intuitive user interfaces and streamlined applications is essential. Borrowers expect minimal friction, clear disclosures and mobile responsiveness throughout the lending process.
  • Implement robust data analytics: Leveraging data to enhance underwriting, detect fraud and personalize lending solutions gives traditional institutions a competitive edge. Automation tools and AI-based decision-making can further improve efficiency.
  • Staff training and change management: Internal teams should be trained not only on new systems but also on the institution’s digital strategy and compliance responsibilities. Change management efforts are critical to ensuring organization-wide adoption.

Maintaining regulatory compliance with digital lending

Rolling out digital lending solutions requires strict adherence to consumer protection regulations, data privacy laws and industry best practices.

Institutions must:

  • Comply with lending regulations: Ensure all Truth in Lending Act (TILA), Equal Credit Opportunity Act (ECOA) and Fair Credit Reporting Act (FCRA) disclosures are digitally available and easily understood by consumers.
  • Protect customer data: Maintain robust cybersecurity and encryption protocols to safeguard personally identifiable information (PII) in compliance with the Gramm-Leach-Bliley Act (GLBA) and other relevant laws.
  • Establish vendor due diligence programs: When working with third-party vendors, institutions must perform proper risk assessments, monitor ongoing performance and establish clear service-level agreements.
  • Maintain audit trails and documentation: Regulators expect comprehensive documentation of loan decisions, disclosures and communications. Digital systems should be configured to automatically store and organize these records.

By investing in the right technologies, developing a thoughtful rollout plan and embedding regulatory compliance into each phase, financial institutions can successfully transition into the digital lending space and offer competitive alternatives to fintech challengers.

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